NMa Suspects Supplier of Breeding Bull Sperm of Abuse of a Dominant Position
Following an investigation, the Netherlands Competition Authority (NMa) has drawn up a report on CR Delta VRV Holding B.V., which through its subsidiary Holland Genetics B.V. is by far the largest supplier of breeding bull sperm to cattle farmers in the Netherlands. NMa suspects CR Delta of abusing its dominant position on the market for breeding bull sperm. The company does so by means of three discount schemes which bind cattle farmers strongly to the company with regard to the purchasing of breeding bull sperm. The result of this is that competition is unlawfully eliminated.
Companies with a dominant position have a special responsibility in accordance with the Competition Act because they, in contrast to other companies, are in a position to exert a strong influence or even to manipulate market conditions. As in the case of other companies, they may compete on the basis of the price, quality and service of their products and services. However, they may not abuse their strong position to eliminate competition by other means. The various discounts which CR Delta offers cattle farmers have a strong effect of encouraging loyalty with regard to the purchase of all their breeding bull sperm from CR Delta. The access to cattle farmers by competing suppliers of breeding bull sperm is obstructed as a result. They are limited in their commercial opportunities.
NMa has determined that CR Delta has a dominant position on the market for the supply of breeding bull sperm to Dutch cattle farmers. CR Deltas market share, which is approximately 80%, is much larger than the joint market share of its competitors.
CR Delta offers cattle farmers three discounts: 1) a volume discount - on reaching a certain turnover threshold, a discount is granted which is calculated on the basis of the total annual amount of breeding bull sperm purchased from CR Delta. This discount is subsequently settled with the purchase of breeding bull sperm in the following year; 2) a customer loyalty scheme - customers who purchase 90% of their total annual requirement of breeding bull sperm from CR Delta received a discount on the total annual amount of breeding bull sperm purchased. If CR Delta supplies their entire requirement, they are given a higher discount; 3) the testers discount - a cattle farmer with a tester agreement who purchases test bull sperm from CR Delta is automatically given a discount of 10% on the purchase of breeding bull sperm. These discount schemes have a strong effect of binding customers. It is therefore not attractive to cattle farmers to make use of the products of other suppliers of breeding bull sperm. The entire system of discounts strengthens this effect.
Since NMa has a reasonable suspicion that CR Delta abuses its dominant position by applying these discount schemes, NMa has drawn up a report on this company. The period in which the infringement occurred, according to NMa, extends from 1 September 2001 up until the present. CR Delta withdrew the customer loyalty scheme after NMa started investigating this scheme.